* Two contractors can't sue for Iraq-related damages - court
* Decision follows similar appeals court rulings in torture cases (Adds comment from contractors' lawyer; no comment from Justice Department)
Nov 7 (Reuters) - Two American citizens cannot sue former Defense Secretary Donald Rumsfeld over allegations that they were tortured by the U.S. military in Iraq, a federal appeals court ruled on Wednesday.
Donald Vance and Nathan Ertel had said Rumsfeld and unnamed others allegedly developed, authorized and used harsh interrogation techniques against them in Iraq.
In an 8-3 ruling, the U.S. 7th Circuit Court of Appeals, in Chicago, found that the two men had no right to sue Rumsfeld and others in the military chain of command for damages.
The decision overturned decisions by a three-judge panel of the same appeals court and a federal judge in Illinois, which had allowed the suit to proceed despite efforts by the Bush and Obama administrations to get the case dismissed.
The ruling brings the 7th Circuit in line with two other federal courts of appeal, the 4th Circuit and the District of Columbia Circuit, which have also rejected suits for damages against U.S. officials over allegations of torture.
In the latest case, the two men worked for a private security company in Iraq in 2006 and said they became concerned the firm was engaging in illegal bribery or other corruption. They notified U.S. authorities and began cooperating with them.
In early 2006, they were taken into custody by U.S. military forces and eventually taken to Camp Cropper near Baghdad's airport. Vance and Ertel claimed they were subjected to harsh interrogations and physical and emotional abuse.
They said that months later they were unceremoniously dropped at the airport and never charged with a crime. They sued, seeking unspecified damages, saying their constitutional rights had been violated and U.S. officials knew they were innocent.
A three-judge panel last year ruled that while it may have been unusual for Rumsfeld to be personally responsible for the treatment of detainees, the two men had sufficiently argued that decisions were made at the highest levels of government. But a larger panel of the appeals court disagreed on Wednesday.
"A court cannot say that, if there are too few prosecutions (or other enforcement), and thus too much crime, then the Attorney General or the Secretary of Defense is personally liable to victims of (preventable) crime," Judge Frank Easterbrook wrote for the majority.
Three judges dissented in three different opinions, saying the majority had created immunity for all members of the military, in violation of Supreme Court precedent.
"This new absolute immunity applies not only to former Secretary Rumsfeld but to all members of the military, including those who were literally hands-on in torturing these plaintiffs," Judge David Hamilton wrote in his dissent.
The contractors' lawyer, Michael Kanovitz, said he had expected the court would be sharply divided on the issue, but added that he was surprised by how far the majority decision went.
Under the ruling, "a civilian can never bring a claim to enforce their rights if they are violated by anyone in the U.S. military," he said.
A spokesman for the U.S. Justice Department, which has been representing Rumsfeld, did not immediately respond to a request for comment.
The case is Vance et al v. Rumsfeld et al, U.S. Court of Appeals for the 7th Circuit, Nos. 10-1687, 10-2442. (Reporting by Terry Baynes in New York; Editing by Jackie Frank and Paul Simao)